There are three possible syndication strategies: Sole Mandate with sub-underwriting, Joint Mandate without sub-underwriting, and Sole Mandate without sub-underwriting. All three had their benefits and there negatives, but in all scenarios Chase would fully underwrite the project. Sole Mandate with sub-underwriting would give Chase the title of lead arranger . To protect itself from the full $3. 3 billion they would in turn gather four other banks (Disney would prefer the other banks that were short listed in the bidding process). These four banks would also be lead arrangers in title but they would have to consign $660 million each.
The rest would be allocated amongst ten other banks at different tiers. So there would be 5 lead arrangers while Chase acts as the sole mandate with divisional rights to all fees, then four arrangers, four co-arrangers, and two lead managers. This would be at $300mil, $250mil, $150mil, and $100mil respectively. The positives would be that Disney only has to deal with Chase and it would control all fee assessment while at the same time Chase will reduce its risks with the four sub-underwriters acting in the capacity as lead arrangers.
The disadvantages are that chase is fully exposed if there are any failures with the syndication since it would be fully underwritten by them. Joint Mandate without sub-underwriting Chase would officially share the coordinating Arranger with two other banks and the underwriting would be shared amongst the three. This strategy would not use any lead arrangers the rest would be then covered by four arrangers, six co-arrangers, and five lead managers. It would go on the books as $300mil, $250, $150, and $100mil respectively.
The benefits of this strategy would be that Chase and the other two banks share the risks completely. The negative would be that the fees would be divided by three and the lead status would also be shared. Sole Mandate without sub-underwriting would be a strategy where chase fully underwrites the project and contain sole lead status and fee allocation. So there would be Chase then four arrangers, eight co-arrangers, and eight lead managers. The money allocation would be the same at all tiers.
The positive to this strategy would be that chase maintains control or the syndication and Disney would only deal with them. There would be a higher rate of compensation but the negative would be extremely high risks assumed by chase and it would be a very large syndication. The best strategy would be having a sole mandate with sub-underwriting. Although this method doesn’t produce the highest return it would at least protect Chase from over extending itself in a potentially risky syndication.